United States: Five Trends In False Claims Act Enforcement: Take Two

Last Updated: April 19 2017
Article by Theresa C. Carnegie and Ellyn Sternfield

In July 2015, we posted about the N.Y. Attorney General's False Claims Act (FCA) settlements with Trinity HomeCare and its related entities, and how the case provided insight into the future of FCA enforcement. We identified five key trends based on the settlements:

  1. The FCA cases were based on qui tams and pursued by the State Attorney General after federal government declination.
  2. The FCA cases were based on a narrow, single state or regional arrangement, as opposed to allegations of a national scheme or program.
  3. One of the FCA cases was based on conduct about which Trinity had previously been warned.
  4. The FCA cases were based on government billings for specialty drugs.
  5. All parties to the arrangement were named as defendants in the qui tams.

Trinity was already under investigation by the N.Y. Attorney General's office for its billing of hemophilia drugs (the basis of the first 2015 settlement) when a second qui tam alleged that Trinity submitted false claims in connection with a specialty drug used to treat premature infants at risk for lung disease. That second qui tam led to the second settlement and now, almost 20 months later, has led to a new Complaint.

2017 Complaint in Intervention

On March 31, 2017, the N.Y. Attorney General filed a Complaint in Intervention in the second Trinity qui tam, naming as the defendant the manufacturer of the drug used to treat premature infants at risk for lung disease. The Complaint alleges that the manufacturer operated a kickback scheme with Trinity which led to the submission of false Medicaid claims for "an expensive brand name injectable drug for infants for which there is no generic substitute" and thus violated the federal and state FCAs.

The Complaint alleges that Trinity shared patient information with the manufacturer that led to the identification of babies who might benefit from receiving the expensive, injectable drug. The Complaint also alleges that the parties did not execute HIPAA Business Associate Agreements or otherwise document compliance with patient privacy laws. Trinity allegedly used patient information to generate prescriptions for the manufacturer's drug, and bill N.Y. Medicaid more than $7 million dollars.

FCA enforcement continues to evolve, especially in the wake of the June 2016 Supreme Court decision in United Health Services v. United States ex rel. Escobar. In many ways this new Complaint provides insight into existing and likely future trends in FCA Enforcement. Some of these trends are the same trends we identified in 2015 and some of the trends have evolved over the past year and a half.

Five FCA Enforcement Trends

  1. FCA Cases Based on Billing Government Programs for Specialty Drugs

As we stated in our 2015 post, specialty drugs are expensive and arrangements related to these drugs continue to be a focus of FCA enforcement. In its Complaint in Intervention, the N.Y. Attorney General repeatedly emphasizes that the pediatric drug at issue was expensive and there was no available generic or less costly alternative. The drug came in 50 mg and 100 mg vials, with some infants requiring multiple vials per month. The Complaint states that, on average, Medicaid reimbursed $1910.32 for the 100 mg vial.

The N.Y. Attorney General alleges that the arrangement between Trinity and the manufacturer was intended to increase sales of this drug, benefitting the manufacturer through increased sales and Trinity through increased Medicaid reimbursement.

While the Complaint describes the arrangement as "cynical and profitable," it is significant to us that unlike multiple other kickback cases for specialty drugs, there is no allegation in this case that infants did not need the drug, that Trinity provided unnecessary drugs, or that the arrangement resulted in any patient harm. Put another way, the claims at issue are not allegedly false because the infants did not need or benefit from the drug, the claims are allegedly false merely because of the alleged underlying kickback.

  1. FCA Cases Focusing on Financial Arrangements

To FCA practitioners, the June 2016 Supreme Court decision in Escobar changed the landscape of FCA enforcement based on regulatory compliance, necessitating the government (or a relator) to establish that compliance with the underlying regulation was material to the government decision to pay the claim. But the federal FCA, and most state FCAs, specifically provide that claims based on alleged kickbacks are actionable as FCA violations. Therefore, arguably, materiality is not at issue in a FCA case based on alleged kickbacks – the statute itself establishes materiality.

But the Trinity case is not a traditional kickback case where money changed hands between the parties to the alleged kickback. Instead, the alleged kickback was the business relationship between the parties that purportedly benefited both the manufacturer and Trinity, or as the N.Y. Attorney General termed it, the "cynical and profitable" arrangement.

According to the N.Y. Attorney General, the alleged remuneration at issue in the arrangement was (a) the "valuable" leads the manufacturer provided to Trinity regarding infants who might benefit from the specialty drug, and (b) the assistance the manufacturer provided to Trinity to obtain prescriptions for the drug, in the form of outreach to physicians and facilities, and identifying specific information about patients and their insurance.

  1. FCA Cases Involving Alleged Distasteful Conduct Underlying or Facilitating the Financial Relationship

In the Trinity case, the qui tam relator was a physician who alleged that Trinity billed Medicaid for the drug at issue for one child based on a prescription that listed her as the prescribing physician, but she did not prescribe the drug. That allegation is repeated in the Intervening Complaint against the manufacturer, although it is not alleged that the manufacturer participated in the creation of that prescription. Further, the Intervening Complaint alleges damages based on prescriptions filled for 600 children, and there is no allegation that the prescriptions for the 599 other children covered by Medicaid were unauthorized by the named prescribers.

Instead, through the Intervening Complaint, the N.Y. Attorney General focuses on the actions the manufacturer's representatives allegedly undertook to identify infants who might benefit from the drug– conduct repeatedly referred to as "aggressive" generation of "baby leads." And it is alleged that the manufacturer's representatives identified these "baby leads" by accessing patient records, including personal health information, without proper authorizations or paperwork establishing HIPAA compliance. Those "baby leads" were then allegedly passed on to Trinity to turn into referrals for the drug that Trinity would bill to, and be reimbursed by, Medicaid.

Had the N.Y. Attorney General alleged the violations of HIPAA rendered the claims false, the assertions would have been subject to the Escobar standard for implied certifications. Instead, the alleged HIPAA violations are used as aggravating or distasteful conduct used to facilitate the alleged "baby leads" that form the heart of the kickback allegation.

  1. FCA Cases Pursued Despite Federal Declination

The federal government initially delayed an intervention decision in the underlying Trinity qui tam, but according to a letter filed with the Court on the Trinity settlement, it did assist in the N.Y. Attorney General's investigation. According to that same letter, the federal government formally declined to intervene in the case on July 30, 2013, but monitored the case and consented to the N.Y. Attorney General's settlement with Trinity.

In our 2015 post on the Trinity settlement, we noted that in the olden days of FCA enforcement (approximately 8 years ago) it was unusual for an FCA case to proceed without federal government intervention. More and more frequently, however, a federal declination may be just the first stage of FCA litigation. When the federal government declines intervention in a Medicaid-based case, it may do so knowing the matter may be pursued by state Attorneys General. And it seems that every day we hear of another FCA case being pursued by relator's counsel after federal declination.

  1. FCA Cases Pursued Against All Parties to the Alleged Improper Relationship

In past FCA cases alleging kickbacks to increase pharmacy sales, government enforcement often targeted the deepest pockets – generally manufacturers who allegedly paid the kickbacks and thus "caused" the false claims to be submitted. Manufacturers would frequently argue that it takes two to make a kickback, and that these arrangements were demanded by the providers. However, the government often reached FCA settlements with the companies that allegedly paid the kickbacks and "caused" the false claims, with little in the way of consequences for the providers who allegedly received the kickbacks and the corresponding government reimbursement for the "false" claims at issue.

But now it appears that FCA cases involving pharmacy kickbacks are not finished until government enforcers have addressed all participants in the alleged kickback scheme. In the Trinity case, the N.Y. Attorney General receipt of a judgment for full reimbursement of its Medicaid program payments to Trinity for the drug at issue is apparently not a deterrent to pursuing a FCA case against the manufacturer of the drug for those same Medicaid payments.

As evidenced by the Trinity case and other recent enforcement efforts, manufacturer-provider arrangements relating to specialty drugs will continue to be subject to scrutiny. It is therefore important for the parties to such arrangements to properly document and structure the arrangement in light of recent enforcement and to ensure regulatory compliance in the operational implementation of the arrangement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Theresa C. Carnegie
Ellyn Sternfield
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions